3.1 Productivity, profitability and quality
In the present times of high cost and competition for customers, there is, universally, a focus on productivity. Briefly, productivity is the quantitative relationship between inputs and outputs. It is controlled by the process which uses the input to covert them to outputs. The more efficient the process, the higher the productivity. Practically, this is seen, for example, in ports where a measure is maintained of container moves per hour, or per shift, or per ship call, or a combination of these. Management is measuring how efficient the process (combination of equipment, people and skills) is in this operation.
The drive behind productivity is usually the drive to reduce marginal cost per unit as low as possible. This translates to being able to stay ahead of competition on the element of price. If, in a port, a ship can be turned around in a shorter period through quicker port operations, the shipowner is attracted to using that port. If the port can deliver this high productivity at a lower cost, this is an added bonus that makes the port a more attractive option for the cargo interests. Similarly, if a shipping company can offer to carry a container at a lower cost per unit than its competitors because it has lower marginal costs, it can stay active in the market longer than other companies that may not have such a high productivity.
Activity 3.1
In not more than 50 words, write what you expect would be the effects of low productivity.
If we take the example of cargo carried on a ship, productivity is measured in tonne-miles per unit time . The more cargo it carries, the higher the productivity per unit time. If the ship's costs are defined on a time or voyage basis, as they often are, then higher productivity results in lower costs for higher output. When costs are low, more cargo is attracted because it is cheaper to ship. When more cargo flows, marginal costs per unit drop as (probably) bigger ships come into service. More cargo also results in more revenue and higher employment of ship and staff. This has a knock-on effect on the community as well-being spread through the accelerator and multiplier effects.
Study hint:
Find out the meaning and effects of "accelerator" and "multiplier": these are both terms you will meet in economics.
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